Munger_Disciple

Any reference on Buffett being a fan of Malone? Thx

It kind of bothers me that Jorge Paulo views Goldman Sachs as a mentor.

VersaillesinNY, Can you please post your notes from the meeting? TIA

In the US, the federal tax rate on long term capital gains is now 23.8% (20%+an additional 3.8% Obamacare "surcharge"). If you live in California, you need to pay an additional state tax rate of up to 13%, which brings the combined tax rate on LT capital gains to nearly 37%! If you have short term gains, the combined tax rate is well over 50% in California. I am not sure if people outside California or New York realize this.

I haven't been following Dhandho closely so this may seem like a silly question. Why is Dhandho/Pabrai selling ETFs? Why do they think they can add value in this field? I thought the original Dhandho plan was to buy an insurer (which they did) and grow by investing float in securities and by expanding insurance biz. I understand they can charge fees to general public that buys ETFs but it seems like a dilution of focus (going from concentrated value investing of float/owner equity to selling ETFs to public).

Thanks!

Poor Charlie, Did you like the book?

Parsad, Merry Christmas and a happy 2016 to you & family!! Thanks for this wonderful site.

scorpioncapital, I would add a fifth item to your list: 5. Any additional capital expenditures that earn good returns on invested capital. For instance, $1 of capex in utilities or BNSF are worth more than 1 x book.

Like many others on this board, my own background was in engineering (prior to becoming an investor). I recently met and chatted with a money manager who got his MBA from Columbia. I asked him whether he thought getting MBA was useful. His answer was that it was just a "Union Card". In terms of its use in investing, he thought it was a total waste of time. If the MBA is not from top five schools, my impression (after talking to him) is that it has no use whatsoever even as a "Union Card".

I am very optimistic about the prospects for Berkshire going forward. I think it is great that they have the ability (thru' BNSF and Energy) to automatically reinvest earnings at a decent, almost guaranteed rate of return.

Buybacks increase the IV/BV ratio and as jay21 points out the probability of a large scale buyback is very small. Moreover Berkshire will only buyback stock if it is the most attractive option available (compared to internally reinvesting earnings/buying other businesses). If buyback is the best option available to Berkshire over an extended period of time (5 or more years), it will be a signal that the days of internal growth for Berkshire are over (not great news for shareholders).

I agree with Vinod. My own analysis of IV/BV ratio over the past 10 years shows that the ratio is remarkably steady over time. Here is my attempt at an explanation for this phenomenon. At a high level, Berkshire owns two types of businesses: (1) ones that can only grow earnings with additional capital, for example BNSF and utilities, (2) those that can grow earnings without much capital being added, ex: KraftHeinz, See's, Businesswire, etc. The first type of business commands a constant IV/BV ratio over time, say 1.6-1.8 range, given the rates of return allowed in these businesses. The second type commands increasing IV/BV ratio over time (consider See's example). However, increasingly larger and larger portion of Berkshire BV is being allocated to the first type of business to a point where these dominate at the present time and will continue to dominate over the next 10 years or more. Also any new acquisitions mostly command a IV/BV ratio closer to 1 at the time of acquisition given that Berkshire typically pays a large premium. Due to all these factors, I believe that IV/BV will at best grow at a very low rate (under 1% per year) over time. It would not surprise me if IV/BV does not grow at all over the next 5-10 years.

Retained earnings increase book value.

Even for a novice this is not a good book to understand Munger in my opinion. Almanac and Dam Right are far better. Then top it off with Berkshire and Wesco AM transcripts.

I too did not think much of this book. There is really nothing new in this book and it was a big disappointment for me. I think Poor Charlie's Almanac and Damn Right are by far the better books about Charlie's life and his philosophy.

Happy Birthday and thank you for the site!

It was 11% a couple of days back. As of 6/25/15, total return of S&P 500 index was 3.12% whereas Berkshire was down 7.26% which means that the index outperformed Berkshire by 10.38%.

YTD Berkshire has underperformed the S&P 500 index by 11%.

Enjoyed the excellent interview.

You should probably talk to a lawyer (I am not one). If it is in the sole discretion of the manager it is probably ok. But if it is in the advisory agreement it is probably considered a performance based fee. For instance if the agreement states that the manager must refund the fee if the performance is below some threshold.

It's a performance based fee as I understand it.

Another problem with going from close to 100% invested to 80% cash and back to 100% invested is taxes that are incurred in the process by the investors. I would like to see the after tax returns of this fund vs. an appropriate index.

There is also tax paid on distributions to shareholders (dividend tax) or upon sale (capital gains tax). These need to be taken into account for DCF estimation.

Warren says in the 2014 AR that buying control stake in Berkshire was the biggest mistake of his investing life.